Mesa CorpAllocates Overhead to Production on the Basis of Direct Labor

question 38

Multiple Choice

Mesa Corp.allocates overhead to production on the basis of direct labor costs.Mesa's total estimated overhead is $450,000 and estimated direct labor is $180,000.Determine the amount of overhead to be allocated to finished goods inventory if there is $20,000 of total direct labor cost in the jobs in the finished goods inventory.

• A)$8,000.
• B)$20,000.
• C)$70,000.
• D)$50,000.
• E)$90,000.

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Definitions:

Static Budget

A budget that is based on a fixed set of assumptions and does not change or adapt to variations in business activity levels.

Planned Activity Level

The anticipated volume of output or activity, often used in budgeting and performance measurement processes.

Machine Hours

A measure of the time that a machine is operated during a specified period, used in calculating manufacturing costs.

Efficiency Variance

The difference between the actual and the standard amount of input (like labor or materials) needed to produce a certain amount of output, indicating the efficiency of resource use.